Pub Rants

Agenting 101: Royalty Statements: Accounting Periods

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STATUS: Cross-eyed from reviewing statements all day.

What’s playing on the iPod right now? OUT OF AFRICA by John Barry

So I have to admit that it’s been a while since I did some nuts and bolts type blog entries. Personally, I find them a little tedious as I LIVE the nuts and bolts of publishing every day. But I don’t want to forget that a good majority of my blog readers have not been published yet and may actually be endlessly fascinated by some nuts and bolts blog entries.

Either that or I’ll bore y’all to tears. Both are equally possible.

Since I’ve been yammering away about royalty statements all week, let’s dig in to this topic. I’ll have to start off a little light because it’s just now occurring to me that this might make a couple of interesting posts and I’m typing this from home (rather than from work where I would actually be looking at a royalty statement).

Obviously I can’t share specifics about any given statement (as that is client confidential) but I can certainly tell you about what is generally on royalty statements (or is missing) and what information agents end up digging for.

So flex your fingers and kick off your shoes; we are diving back into some Agenting 101 entries that I’ll need to bookmark on the sidebar.

Because it’s a little late in the day (and I really need to finish up a client manuscript read), let’s start with something simple.

The accounting period.

This is a lovely and archaic system that publishing houses have in place despite all our digital technology. I imagine that at one time, this sort of accounting period made sense. In today’s world, it’s a relic and I wish it was like a dinosaur and would become extinct.

The traditional NYC Publishing houses do reporting in 6-month increments. For ease of explaining, imagine a royalty period that begins January 1, 2009 and ends on June 30, 2009.

Six months.

Then the publishing houses, and this cracks me up, get four months (oh you read that right—4 months) to generate and mail that royalty statement (with a check if monies are owed). Why four months is necessary in this day and age is rather a mystery. Or maybe not a mystery. Publishing houses want to hold on to your money for as long as possible. (As an aside, I love Holt Uncensored and Pat Holt’s idea of revolutionizing the royalty system by making online royalty accounting available for authors). Brilliant—but then there would be no reason for taking four months to mail you the statements.

But I digress. So if you have a royalty accounting period that ends on June 30, 2009, the author is going to have a royalty reporting period of April/October (October for the June-ending statement and April for the December-ending statement).

All information on the statement will be for sales (in all formats) from that six-month period. So when you get the statement, you’re already months behind in knowing current numbers.

Got that?

24 Responses

  1. Marion Gropen said:

    The 4 months aren’t because they need the time to create the statements, although there are complexities there, that you might not know about.

    The time is because bookstores take 90 to 120 days to pay, in good times, and more in bad. So the 4 months means that the company is just getting paid for the sales made at the end of the royalty period.

    And electronic systems or no, given the wide ranging royalty provisions in author contracts, the ancillary accounting that needs to be done (indexing payments, comp copies and other inventory numbers hunted up, and so on and on) and the truly bizarro things that can happen with payments of subrights, special sales, and so forth, it is still a real PITA to do royalty statements.

    And there’s another reason why it can take a while to crunch those numbers: humans who know the books and the sales have to sign off on each one. Computers have no sense of whether something is reasonable or not, they’ll happily fly right past some really odd things.

    Hope that helps add some light to the topic.

  2. Gordon Jerome said:

    Traditional publishers should wake up to the fact that they could probably publish many wannabes for nothing. That is no advance and no royalties–just a name on the cover. And agents could charge those same authors to represent them, and they’d pay, and everyone would be happy. You can do anything you want to wannabes.

    Such is the plight of a worm with bird dreams.

  3. Anonymous said:

    The key sentence in the above is “sales at the end of the royalty period” take time to come in.

    Money flows to a business all year, it’s not like you have to pay the author with the money from their particular sales.

    It’s natural for a company to want to put off paying its creditors until its debtors have paid up (but most can’t do that completely) and yes, the various weirdnesses of publishing contracts must be complex to track and account for but I’m pretty sure that the publishing houses are paying all their other creditors on a more regular basis throughout the year or they wouldn’t be in business. Why should authors be at the bottom of the creditor list? Especially when most of the money, for the period will have been collected and the royalty amount is only a small percentage of what the publisher earns from the book.

    Six months plus four months probably made sense when reporting was all done manually and you had to wait for the booksellers to send information and collate everything but you’d think with computers and barcodes and all these things, you could at least get quarterly reporting happening. More work for the publishing company though which might be a large portion of the reason besides them not being able to hang onto cash as long.

  4. Tina Lynn said:

    Nuts and bolts!

    Nuts and bolts!

    We got screwed!

    Sorry, both the title and the subject matter came together so nicely for an old sideline cheer for the refs that I remember with much fondness:)

  5. Timothy Fish said:

    As long as bookstores have the option of returning books, I can see a reason for publishing companies to want to delay. That is probably better for the author. That means that if the author gets paid, he gets to keep the money. For the books BookSurge prints, they don’t accept returns, so they provide online statements showing each book sold and hold much the publisher will receive on each. The money doesn’t show up for about a month, but that has more to do with reducing the number of transactions than anything else.

  6. Anonymous said:

    I’m looking forward to my very first royalty statement this month. Will it show a breakdown of sales? Like, X with Barnes & Noble, Y with Independents, Q with libraries? I’m just really curious about what you can learn from these statements. I hope I’m not overanticipating. 😀

  7. Anonymous said:

    Anonymous, I’ve been told that some publishers *cough*Random House*cough* give that breakdown, but most like mine do not.

  8. Rebecca Knight said:

    It’s definitely endlessly fascinating, including the extra info from the commenters!

    Thank you for the inside scoop, and please keep it coming! 🙂

    Captcha–zilling. “Zany billing?” seems appropriate!

  9. Anonymous said:

    i sent a submission of the first 30 pages to kristin nelson but i included the summary of my book even thou she said not to :S just got confused bc she asked for the original query letter and tht included the summary :/ did i ruin my chances?

  10. Vivi Anna said:

    Most royalty statements are not broken down by the vendor.

    This is how most look..

    domestic sales
    foreign sales
    direct to consumer sales


    royalty earnings net of reserves

    deductions (your advance)

    amount due or unearned (either you get some money or you still have to earn out your advance)

  11. mtz322 said:

    And then there’s e-publishers and zero inventory print publishers. Most do at least quarterly statements/payments. Some did monthly, but unless they are also the vendors that is getting more and more difficult!

    Online vendors/distributors have sorta/kinda merged. This should make it simpler, right? Nope.

    First the publisher has to get the information. What sold? The bigger the distributor/vendor the longer it takes to find out particularly for small publishers.

    And payment? Depends. Electronic payments may not include statement. Check payments may just include something like ebooks. Huh? which ones? how many?

    Sometimes the payment comes first, sometimes later. If we are lucky it all comes in before we are scheduled to send out royalty statements and payment to the authors.

    Then there’s the list versus net stuff. I’ve stubbornly held to list as basis but that has meant passing up some venues that would have ended up our losing on every sale.

  12. Mandy Hubbard said:

    Anon, I haven’t looked at Kristin’s guidelines in awhile, but I believe what she doesn’t like/want is a synopsis. That’s the 2-5 page description of your book that includes the beginning, middle and end.

    Your query letter should always have a “summary”, as in, 2-3 paragraphs that tease the book and tell us what its about. It intrigues the agent and makes them want to read more. If your query gives away the ending, you need to rewrite it.

  13. Mandy Hubbard said:


    There is a publisher out there (harper collins, i think?) that is experimenting with what you’re talking about– a no advance publication deal.

    There are several key issues with the idea that traditional publishers should go to a no-advance method. The way you describe it the author would pay an agent to be their agent upfront– which right off the bat would cuase A LOT Of issues, because it opens it up WIDE for scammers to collect money, claim to sub books, and get rich doing nothing. It’s ALREADY a problem and every single advice book out there tells writers to NEVER PAY A DIME. So imagine if that was the business model and writers were supposed to pay upfront.

    Secondly, bookstores only have so much shelf space. Every year, a huge percentage of novels are skipped by the chains. In my debut author group (YA and MG writers) I’d say about half were skipped in one chain and 1/4 of them were not picked up by EITHER.

    Flood the market iwth more books, and you’re going to see that percentage increase. The publisehrs and teh authors don’t win if no one can get the books into stores becuase there’s simply too many of them. Chains are selective.

    Lastly, the advance is only a small part of the publisher’s investment. They have to pay the editors, the cover designers, the copy editor, the typesetter, etc. Then they have to pay to print ARCs and pay a publicist to push them. Then the cost of printing the books, shipping them out–and if it doesn’t sell, shipping them back–etc.

    it doesn’t matter what they pay you, they’ve still got a substantial monetary investment.

    So while your theory sounds nice from an author’s perspective, I’m not sure it would work very well.

    Prada & Prejudice (YA)

  14. Anonymous said:

    Gordon, if all you want it to have a printed book with your name on it, there are plenty of ways to do that. And if all you want is for “someone to read it”, then hand it to your mother, or to your best friend, or post it on a website. As a published author, I want people to BUY my books; I don’t actually care any more whether they read them or not. The publisher also doesn’t really, in its heart of corporate hearts, care whether people read the book, only whether they BUY it. BTW, traditional publishers already KNOW wannabes would do it for free.

  15. Marion Gropen said:

    Um, as for paying when it’s due, may I remind you that the vast majority of all royalties ever owed on a trade book are paid as an advance–before any sales are made, and any royalties are due.

    For those who think authors are badly treated, I suggest you look further into the economics of publishing fiction or trade non-fiction. Look at the the discounts they have to give, and the typical expenses of launching a mid- to lower-level trade book, let alone a big one. You might be surprised at what’s happening behind the curtain.

  16. Anonymous said:

    If it makes you feel better, they pull that kind of crap with their employees too. Not my current house, but my previous house started holding our yearly performance bonuses from January to the end of March because people were complaining that they weren’t receiving their reviews before they got their checks. This three month grace period was to allow managers to hold these reviews more promptly. Never mind that the managers had to turn in their final review and bonus tally in September, so whether you had your review in January or April made no never mind. They back-dated the bonus based on monies that included the three month delay, creating an illusion of generosity when really, they got to pocket the interest for those three months without actually improving anything for the employees.

    My last year with the company, and one of the reasons I left, the formula they used for the backdating was flawed and they embezzled half a million dollars from their employees.

  17. Nick said:

    Wouldn’t the book industry benefit greatly from a royalties-per-use model? It seems ridiculous that a publisher/author would only get paid once when the book is sold. After that, it gets sold again and again by used book vendors and the author never sees a dime of that. Netflix has worked with movie production houses to work on this model and it allows an author to get paid more fairly.

    I bring this up because I work for a book rental company – and on top of that am an author (while not a very good one). Currently we purchase our inventory once them rent it over and over again without having to pay the authors or publishers anything. To be honest, while this works in our favor in the long-run, we have been seeking publishers that are willing to work on a rev-share model.

    To bring this back to relevance – What is great about such platforms is that they require a huge amount of tech integration and 100% clarity. Unlike book stores where inventory can be returned, must be audited, etc, with a rev-share model you get instant access to “uses” numbers that can easily be calculated into revenue.

    Does anyone know why publishers don’t like this?

  18. Marion Gropen said:

    You already told us why publishers don’t like it: it requires perfect technical integration and clarity. That’s almost impossible within the context of systems that have to do what publishers’ systems have to do.

    More, most large publishers are working with systems built over a “legacy” core. That means, the heart of the system was coded decades ago, and has been updated and added to incrementally as time went on. And the documentation doesn’t remotely deserve the name.

    Some (Holtzbrinck, RH, others) have scrapped those old systems and started over. ALL of them have budgeted stunningly large sums to do it, and hired some of the best outside software firms to work with their in-house experts. And all have taken serious hits in the process.

    It’s a LOT more complex inside the sausage machine than it looks from the butcher counter. And, like sausage, it’s best not to look too closely into the process, or you’ll spoil the taste.

    Or something.